In a surprising turn of events, the National Australia Bank (NAB) has revised its forecast for the Reserve Bank of Australia’s (RBA) next rate cut, now predicting it will occur no sooner than May 2026. The shift comes after the release of unexpected Consumer Price Index (CPI) figures, which showed a rise in inflation that exceeded market expectations.
News outlets have reported that the higher-than-anticipated CPI data has cast doubt on the possibility of an immediate rate reduction, which many had initially anticipated for later this year. As a result, the RBA’s future decisions are under increased scrutiny, with financial analysts adjusting their predictions accordingly.
Inflation Figures Overwhelm Rate Cut Speculation
Initially, NAB had forecast additional rate cuts in November 2025 and February 2026. However, with the August CPI data showing inflation surging to an annual rate of 3%—up from 2.8% the previous month—the bank has adjusted its expectations. This marks the highest inflation rate since July 2024, and it has caused many economists to reconsider their predictions.
The rise in inflation was primarily driven by housing (up by 4.5%), food and non-alcoholic beverages (3%), and alcohol and tobacco (6%). The electricity price spike, particularly in Queensland, Western Australia, and Tasmania, also played a significant role.
The end of state energy rebates—worth $1000 in Queensland, $400 in Western Australia, and $250 in Tasmania—left many households with significantly higher out-of-pocket costs than in August 2024, according to Michelle Marquardt, head of price statistics at the Australian Bureau of Statistics (ABS).
Sally Tindall, Director of Data Insights at Canstar, noted that the RBA typically does not place much weight on monthly CPI data, but “these results are difficult to ignore.” She added,
The RBA doesn’t put much weight on the monthly data, but these results are difficult to ignore out of hand and the Board isn’t going to take risks with inflation. It’s a stark reminder of how quickly forecasts can change. NAB might be right. It also might be wrong, but what this change in forecast is, is a wake-up call that if you want a rate cut before Christmas, you might need to get it yourself.
This caution from the RBA underscores how unpredictable the economic landscape can be. NAB may be correct in its forecast, but the shifting outlook serves as a wake-up call:
If you want a rate cut before Christmas, you might need to get it yourself.
Energy Rebate Impact on Inflation: What’s Driving the Numbers?
The increase in inflation in August 2025 was heavily influenced by the end of state energy rebates, which had provided significant financial relief to households in Queensland, Western Australia, and Tasmania. As these rebates ended, households faced higher electricity costs, contributing to the overall rise in inflation.
This has left many Australians grappling with the higher costs, especially with energy bills being a key driver of price increases.
Treasurer Jim Chalmers attempted to downplay the volatility of the August figures, acknowledging that monthly data can often be misleading.
We know that monthly inflation figures can be more volatile and less reliable than the quarterly figures because they don’t compare the exact same basket of goods and services from month to month – he said.
The more reliable quarterly data shows that both headline and underlying inflation have remained within the target band for the six months to June.
Michelle Marquardt, head of price statistics at ABS, explained that the increase in electricity prices was largely due to the cessation of energy subsidies, saying,
The annual rise in electricity costs is primarily related to households in Queensland, Western Australia and Tasmania having higher out-of-pocket costs in August 2025 than they did in August 2024. In August last year, state government electricity rebates were in place for Queensland $1000, Western Australia $400 and Tasmania $250.
Despite the government’s assurances, the surge in inflation has raised concerns that further rate hikes could be on the horizon. The issue is especially pertinent for owner-occupiers who have not renegotiated their rates since the RBA began tightening monetary policy in 2022. As of now, the average variable rate for these homeowners sits at 6.36%, which many experts believe could be costing Australians thousands of dollars each year if they stay loyal to their current lenders.
Owner-occupiers sitting on rates above 6 per cent could be throwing away thousands of dollars out of loyalty – said Tindall.
